Virgin America takes hit from its transition to Sabre

Source: Skift
Author: Dennis Schaal

Virgin America is a major carrier now, as defined by the Department of Transportation, and in the first quarter it experienced growing pains related to its capacity growth and transition to Sabre as the airline’s reservations systems provider.

A private company with a minority investment from Richard Branson’s Virgin Group, Virgin America experienced widely reported glitches and delays when it migrated to Sabre in late October 2011, which led to some revenue shortfalls in the first three months of 2012.

During the first quarter of 2012, “website issues and revenue management challenges” tied to the move to Sabre reduced revenue by $10 million to $15 million, the airline says.

Upgrade fees and other revenue management issues were the main problem, says airline spokesperson Abby Lunardini.

Transitioning to Sabre from former providers SITA and IBS was supposed to be all about driving new revenue with a flexible platform, one that would accommodate international service and airline partnerships. While that bump didn’t happen in the first quarter, which ended March 31, Virgin America states it is confident about the long-term prospects of its new reservations technology.

For example, Virgin America has tied its Elevate frequent flyer program to those of sibling Virgin carriers and now counts 14 interline partnerships.

Virgin America posted a nearly $48.6 million operating loss in the first quarter, from a smaller $29.5 million in the red a year earlier, on operating revenue of $267 million, a 32.8% jump.

As opposed to some other U.S. carriers, Virgin America is increasing capacity and grew its fleet from 38 aircraft in March 2011 to its current 52 planes. That expansion includes five Airbus A320 aircraft, which came on board during the quarter.

In the 12 months prior to March 2012, Virgin America launched new service to Cancun, Chicago, Puerto Vallarta and Palm Springs.

Fuel costs, which rose 47% year over year during the first three months of the year, weighed down the airline’s first quarter numbers.

Launched in 2007, Virgin America several months ago achieved “major carrier” status, based on its 2011 growth.

During the first quarter, Virgin America scored the best baggage-handling mark — 0.94 mishandled bags per 1,000 passengers — of any U.S. carrier.

Hopefully, the airline won’t mishandle is growth strategy.